Large telemarketer for charities declares bankruptcy

By Kris Hundley, Staff writer

Published March 14 2014

Updated March 14 2014

One of the nation's largest charity telemarketing firms filed for bankruptcy Thursday.

But the Chapter 11 filing by Michigan-based Associated Community Services is unlikely to end the phone calls from its employees, who solicit in Florida and 40 other states for some of America's poorest performing charities.

In a court filing, company president Richard Cole asked for approval to continue paying Associated Community Services' nearly 900 employees in order to remain in business.

In an email to the Tampa Bay Times, Cole said, "The bankruptcy will offer our company the opportunity to restructure and serve our clients more efficiently."

Associated Community Services, co-owned by Cole and Robert W. Burland, was profiled in the Times' and Center for Investigative Reporting's series on charities that routinely allow outside solicitors to retain the majority of funds raised. Founded in 1999, the telemarketer keeps as much as 85 percent of every dollar donated by the public. It solicits for dozens of charities, including nine of the 50 worst named in the Times'/CIR series. Among its clients are Cancer Fund of America and Children's Cancer Fund of America, Nos. 2 and 10 respectively.

IRS records filed by charities show that Associated Community Services raised nearly $40 million for its clients in 2011.

The telemarketer has been repeatedly disciplined by state regulators for misleading donors in its fundraising calls. Last year it was banned from soliciting in Iowa; last month it was fined $45,000 by Michigan's attorney general for deceiving senior citizens. The company denied any wrongdoing.

Though it kept the vast majority of the money raised, Associated Community Services said in court documents that its revenues have been declining by more than $100,000 a week over the past year. Meanwhile, its debts have risen, with the landlord of its call center in the Detroit suburb of Southfield threatening to terminate the lease for unpaid rent.

The company also owes more than $15 million in unpaid taxes to the IRS and more than $1 million in unpaid state tax.

In financial projections provided to the court, Associated Community Services said it expects to be "nominally profitable" by early May, netting about $50,000 on more than $5 million in revenue over the coming eight weeks.

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